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Daily Archives: May 3, 2012

It seems this year the MLS industry buzz is “App Store” and I see platform vendors scrambling to provide this shiny new object. I’ve been approached by several asking if my company would participate and I’m always open-minded, but still have to scrutinize where I invest my resources. I’m not convinced the benefit is worth the investment in many situations, so for me the jury is still deliberating.

Yesterday I noticed a post and some comments on the WAV Group blog about this subject and I felt compelled to share some insights and my personal opinion. My comment is awaiting moderation so I thought I would also share it here for those that care to read my rather lengthy response.

Gents, I’d like to chime in as we’ve tested this model at Goomzee and there are indeed pros/cons.

I haven’t seen LPSs offering yet but I know the gang are smart, and Rich is great at positioning and user interface design. I’ve seen the Spark platform and they’ve done a great job with documentation and preparation. I’m already working with other independent’s who’ve forged out this model and I have mixed reviews and serious concerns over whether MLSs should even be investing their time in this in lieu of other customer needs. Again, we have something shiny and new, but I don’t think people have really thought through or flushed out their business cases. Perhaps some perspective from someone who’s been there, done that not only in the real estate industry, but also in two other industries, might be useful (my personal experience).

The pros seem to really only benefit the MLS (and that is questionable actually as you read on), but at the expense of the end user and vendor in most cases. The only real problem solved is centralizing procurement and promotion. For an MLS that prides themselves on customer service, and a vendor that prides themselves on the same, and their brand, it can actually be a very risky proposition so indeed it must be done properly, if that’s possible at all, which I’m not 100% convinced. The real question to ask is whether your customers screaming for you to solve online ordering because it’s too difficult to visit someone’s website and enter credit card information?

Personally I think this model could work for small MLSs with limited staff and outsourced support to vendors because their end-users are already trained on that MLS-vendor relationship. In small quantities, that could work, but in large quantities, it’s a nightmare both for the vendor and the end user, and ultimately the MLS because of frustrated customers (the folks who ultimately pay their bills). I also think this model could benefit vendors, especially new entrants, to help acquire smaller markets that are fragmented that they might not have invested as heavily into multi-year sales cycles, tradeshows, travel, relationships, product, integrations, and brand.

For larger MLS markets that provide their own support, and those vendors invest $millions in multi-year sales cycles and business relationships, product enhancements, integrations, etc., I believe you have a disaster waiting to happen by diluting the very benefit from investing in those long business cycles. Further, I’ve seen firsthand the frustration MLS customers face when getting the “runaround” over who to contact to get their problems solved. One extra step or call and they’re livid and looking for someone to blame or bash online. MLS staff are typically not equipped to handle support for a vast array of products, and have enough on their plate just supporting the MLS system itself. Once customers have questions or issues with a 3rd party product, the MLS staff note the issue, then typically pass it onto the provider. The provider then has to attempt to contact the customer to make them repeat themselves, and often they’re not answering phone or emails at this point so it stretches out days sometimes. At that point, they’re so upset that they start to dislike the provider as an outlet for frustration, risking their brand and any potential referrals.

The #1 support issue I see with one of our products, for example, is logging in, and over 90% of the time, the user input the password incorrectly or improper case, sometimes caused by their phone capitalizing a letter and they didn’t notice. Something as simple as that, which the vendor was not at fault at all could take days to resolve (phone/email tag), could lead to product cancellations, bad reviews in app store, and no potential referrals and all could have been avoided if the end user contacted the provider directly. The support costs for vendors more than doubles because of the extra effort to reach customers after the fact, then troubleshoot and resolve. To make matters worse, most models want vendors to reduce their prices, and give up more of their revenue, and ultimately cost them more in support so if they’re smart, they’ll instead raise their prices to offset and in the end, yet again the end user is punished by having to pay more.

I have firsthand experience both in the real estate/MLS industry, and in my “past life” running my family businesses, and have seen these shortfalls (mainly in customer service and end user confusion) by adding this additional layer of separation between the end customer and the “service provider”. My family’s towing business, for example, was the largest AAA service provider for over 30 years in the Inland Northwest in regards to call volume. My grandfather personally sold AAA memberships right out of the truck for several decades to build up their membership in and around Western Montana. Customers called direct, received excellent service and recommended others, and because the service levels were so high, as our company and market grew AAA saw no reason to introduce additional service providers because the service levels and membership renewals were higher than other markets around the US. In other markets of the same size they’d have 2-3 providers but satisfaction levels were the best in the country so there was no reason to fix what wasn’t broken. This all changed when new leadership got the bright idea to centralize a call center and force all AAA members to call their toll free 800 number.

The first 2 years, customers were so frustrated and upset that memberships declined and many of our customers refused to wait for AAA’s toll free operators and called us back and opted to pay for service instead of the runaround, and submit the invoice to their insurance. This was great for our company initially because they paid us 100% more than AAA’s contracted price, but bad for them because of the hassles. Ultimately, most AAA contractors in the state started de-prioritizing AAA calls over cash calls and the end customer now has to wait longer to get rescued on the side of the road, and many cancelled memberships and now go the cash option.

Some service providers in other cities even dropped support for AAA altogether, and only service cash customers direct to ensure they receive high marks of customer service, more revenue per customer, and referrals given they maintain their business relationship. This relationship is key to long-term business success, especially in local markets. We only kept AAA because we treated it like a loss leader, and our drivers were “outside salespeople” selling the services of our other businesses, namely our auto repair shop. When local repair shops and dealerships saw a decline in their business (newer, long-lasting cars), however, they purchase towing equipment and promote towing direct to customers so they increase top-line revenue, and ensure they keep their customer relationship.

At this point, there’s was no incentive for our company to support AAA and they later introduced 2 other local providers and diluted the benefit, so it is no longer top priority to provide the same service levels for less money and a customer we have no relationship with. The issue was that extra layer of abstraction between the end customer, and the service provider, severed that relationship and results in substandard customer service and wait times to get issues resolved. But I digress so back to the MLS and real estate industry.

I might compare this model to the franchises’ approved vendor programs. They try to collect fees from vendors, and often require attendance to one or more conferences (committing $20-50K annually each in booth, travel, payroll, etc.). We were approached by the top brands and truly considered these years ago and marched down that path, only to learn that it was merely a revenue source for franchises and their agents knew it. Upon researching, I found that the agents put little, if any, stock into the directories (I asked them personally at many trade shows and all stated the same). I decided not to invest in that model and it was the best decision I ever made. It works to reach some new entrants, but most I found spend so much to get in the business they cannot afford to keep going so start dropping services as fast as they sign up and skate by on life support and credit cards or part time jobs until they get some listings and closings. Really vendors only prosper with that model as a “pay to play” strategy to gain opportunities to pitch the franchise for some enterprise solution (i.e. Market Leader, Wolfnet, etc.). At that point it’s a drop in the bucket for the $30-50K/year you have to invest to win multi-million-dollar contracts, but for most it’s a losing proposition and just means for the franchise to fill some booths at a retreat or trade show. There are no guarantees they will promote you, provide you mailing lists and whitelist your domain from spam filters, or offer any exclusivity of any kind so very one-sided.

I do still see that bandwagon affect, and organizations rushing to make decisions without truly analyzing their organizational goals, and the affects of their decisions only to have to back peddle and clean up the mess later. If you take a consultative approach to making business decisions, the first is to define the business case, your organizational objectives, and the measurements (or KPIs) to determine if your actions met your expectations. The bottom line is to ask yourself “what problem am I trying to solve?” and most importantly “are my customers asking me to solve this problem?”. I admit, I really wanted to make Social Media work for my company and even invested in prototypes and research but then the cold hard question of how that will benefit my customers forced me to abandon it. The harsh reality is that few models prosper from Social Media as sexy as it is. In the real estate industry the agents agree to cooperate at the listing level, but compete on nearly every other level, so if something is great they’re less inclined to “skill up the competition.” If I’d not really asked what problem I was solving and what the true benefit was, I’d have wasted more time and $tens to hundreds of thousands in engineering.

To me, an app store for small MLSs could work to solve the problem that they don’t have the staff or processes to efficiently select, negotiate, or promote 3rd party solutions to their members but if you dig deep, there still must be a selection/vetting process to avoid recommending substandard products to customers. If that is the case, they really only save on promotion, but must look at what you currently invest in promotion. For smaller MLSs, it could be a quarterly lunch and learn where they invite speakers (who typically sponsor lunch anyway), and a logo in a monthly newsletter or on a partner page on their website. The investment they make is so small, there’s little actual gain so again what problem do they solve?

One could argue that non-dues revenue stream is the justification to kick off this process, but many vendors already offer the revenue share model to MLS. In this case the only incentive is control and transparency, but that can be solved contractually (and typically is) by requiring the right for audits. Another rule of thumb is don’t do business with people you don’t trust and that typically solves all fears/concerns over control. If the revenue expectations are truly so great that it makes sense to kick off organization change of this type, I’d say instead invest more time and effort in supporting and promoting the companies they are already working with and get higher return, plus partners willing to work harder for them because there are incentives to do so.

One of the other justifications for this model I’ve seen is central access or SSO integration, which again leads me to believe this might work for smaller markets but not for larger multi-regional markets. Most vendors, like my company, have already integrated with the MLS systems in these larger markets, and must customize their systems to handle the unique rules as result of mergers and combined boards and legacy data designs and processes.

In looking at the pros/cons, especially as a vendor who is testing this model already, I can say for certain that the end-user suffers regardless just by sheer confusion, runaround and frustration, plus more change which is tough as we all know. I would strongly encourage MLS executives to first define a business case before jumping on any bandwagons. Ask yourself whether your customers are demanding that you make signing up for products online easier, and how important that is compared to all their other needs, and ultimately what problem you’re solving and the risk vs. reward.

As a vendor, I personally am on the fence with this model, but always keep an open mind and try anything once (or twice or thrice because I’m a stubborn and optimistic entrepreneur). Ultimately, the only justification as a vendor I can see for this model is to pick up smaller fragmented markets for marginal revenue opportunity, but I’d first design my product and service expectation levels to more of a self-service model to avoid risking my brand and setting proper customer expectations up front. If the product is not designed for self-service, watch out!

As enticing as additional margin revenue opportunity is (with no guarantees of course), I also have little/no interest in diluting the significant ($millions) investment I’ve already made in existing markets, knowing the significant disincentives that lay ahead. The level of customization required to effectively support these costs a lot of money and resources. MLSs should not recklessly discard the investments they’ve asked companies to make to date, only to ask for even more investment with no incentives (exclusivity, higher margins, more promotion). Instead of incentives from the programs I’ve seen, I actually see the opposite: asking for larger cut into margins, lower prices, no exclusivity, no personal customer relationships, risk brand reputation because of frustrated and confused end-users, no control over cash flows (waiting for commission checks), and no way to solve billing or cancellation issues and instead giving end users the runaround.

My biased (but honest for those that know me) advice is to think long and hard on what problem you truly solve and ultimately whether the end-users are asking you for it. Also think about what incentives you offer the service provider to subscribe to such a model, because ultimately they are whom you rely on to maintain your reputation with your customers. If it’s not truly a win-win relationship, all suffer or your customers are left picking up the scraps. You could spend more time and energy supporting your partners and making them successful instead of constantly chasing that shiny new object for fear of getting left behind. Your stakeholders will not fault you for bolstering customer satisfaction, revenue, and a stable and successful partner relationship.